Berger et al v. Lydon-Bricher Manufacturing Company
Filing
56
ORDER granting, subject to conditions, 43 Motion to Alter/Amend/Supplement Pleadings. See Order for details. (Written Opinion) Signed by Magistrate Judge Becky R. Thorson on 11/30/2018. (DMM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
David Berger, and Berger Table Pads, Inc.,
Civ. No. 17-4326 (PJS/BRT)
Plaintiffs,
v.
Lydon-Bricher Manufacturing Company,
and Sentry Table Pad Co.,
ORDER ON PLAINTIFFS’ VERIFIED
SECOND MOTION FOR LEAVE TO
FILE SECOND AMENDED
COMPLAINT
Defendants.
This matter is before the Court on Plaintiffs’ Verified Second Motion for Leave to
File Second Amended Complaint (Doc. No. 43). The Court held a hearing on the motion
on November 19, 2018. (Doc. No. 52.) Based on the file, records, and proceedings herein,
and as further discussed below, Plaintiffs’ motion is granted, subject to multiple
conditions as set forth in this Order.
BACKGROUND
Plaintiffs commenced their patent infringement action on September 20, 2017.
(Doc. No. 1.) They filed an Amended Complaint on December 27, 2017, after Defendants
pointed to deficiencies in Plaintiffs’ original pleading during a meet and confer on a
potential motion to dismiss. (Doc. No. 14; see Doc. No. 50, Decl. of Theodore M. Budd
in Opp’n (“Budd Decl.”) ¶¶ 6–7, Exs. D, E.) Defendants timely answered the Amended
Complaint on February 16, 2018. (Doc. No. 19.) In the Amended Complaint, Plaintiffs
asserted only claim 1 of U.S. Patent No. 6,165,577, attaching a copy of the patent as
Exhibit A. (Doc. No. 14.) A one-page “Illustration of Defendants’ embodiment” was
attached as Exhibit B. (Id.) Consistent with the Amended Complaint, Plaintiffs identified
only claim 1 in their Rule 26(f) Report describing their patent infringement claims. (Doc.
No. 25.) In their Rule 26(f) Report description, Defendants denied infringing at least
claim 1. (Id.) United States Magistrate Judge Franklin Noel entered a scheduling order on
April 19, 2018. (Doc. No. 29.) The case was then reassigned to the undersigned on
May 7, 2018. (Doc. No. 30.) On May 10, 2018, the parties jointly submitted a proposal to
amend the Scheduling Order to correct a typographical error in the fact discovery
deadline. (Doc. No. 31.) An Amended Scheduling Order was issued on May 11, 2018.
(Doc. No. 35.)
With respect to pleadings, the Amended Scheduling Order provided the following:
Once a party has given the necessary discovery, the opposing party may
seek leave of Court to add claims or defenses for which it alleges consistent
with Fed. R. Civ. P. 11, that it has support, and such support shall be
explained in the motion seeking leave. Leave shall be liberally given where
prima facie support is present, provided that the party seeks leave as soon
as reasonably possible following the opposing party providing the
necessary discovery.
(Id. at ¶ A(1)(b).) The Order restated a September 1, 2018 deadline for the filing and
service of all motions that sought to amend the pleadings or to add parties. (Id. at
¶ G(1)(A).)
Plaintiffs’ filed a motion to amend the Amended Complaint on August 31, 2018.
(Doc. No. 38.) It was deficient in almost every way. Plaintiffs’ counsel never even
attempted to meet and confer with Defendants’ counsel. They did not seek a hearing date
for the motion. They did not file a memorandum of law. And, they did not submit a
redlined version of the proposed Second Amended Complaint. (See Doc. No. 49, Defs.’
2
Mem. of Law in Opp’n to Pls.’ Second Mot. for Leave to File Second Am. Compl.
(“Defs.’ Opp’n”) 5–6, n.1.) Plaintiffs’ motion was stricken on September 4, 2018. (Doc.
No. 38, text entry.) On September 12, 2018, Plaintiffs’ counsel learned that their motion
had been stricken. (Doc. No. 45, Mem. of Law in Supp. of Pls.’ Verified Second Mot. for
Leave to File Second Am. Compl. (“Pls.’ Mem.”) 2.) Plaintiffs filed a second motion to
amend six days later on September 18, 2018, which is the motion presently before the
Court. (Doc. No. 43.) Despite their deficiencies being flagged, Plaintiffs’ counsel still did
not submit a redlined version of the proposed Second Amended Complaint, in violation
of Local Rule 15.1(a).
ANALYSIS
Plaintiffs contend that they timely moved to amend their Amended Complaint on
August 31, 2018, even though the motion was later stricken. While it is true that
Plaintiffs’ counsel did not learn that their motion had been stricken until September 12,
2018, due to the way it was docketed, there is no question that a motion—in compliance
with the Local Rules—was not filed by the motion deadline. Accordingly, in the Court’s
view, Plaintiffs’ later filed motion, on September 18, 2018, should have included a
request for an extension to the deadline for amending pleadings pursuant to Local Rule
16.3. Local Rule 16, had it been argued, would have required Plaintiffs to “(1) establish
good cause for the proposed modification; and (2) explain the proposed modification’s
effect on any deadlines.” D. Minn. LR 16.3(b). The interplay between Federal Rule of
Civil Procedure 15(a) and Rule 16(b) is settled in this circuit. “If a party files for leave to
amend outside of the court’s scheduling order, the party must show cause to modify the
3
schedule.” Popoalii v. Corr. Med. Servs., 512 F.3d 488, 497 (8th Cir. 2008) (emphasis
added). “To permit district courts to consider motions to amend pleadings under Rule
15(a) without regard to Rule 16(b) would render scheduling orders meaningless and
effectively . . . read Rule 16(b) and its good cause requirement out of the Federal Rules of
Civil Procedure.” Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 716 (8th Cir. 2008)
(quotations omitted). Here, Plaintiffs’ made no effort to satisfy Local Rule 16.3.
Even if Plaintiffs could satisfy Local Rule 16.3, or successfully argue that their
deficient—and stricken—motion was timely filed, Plaintiffs’ motion fails to satisfy even
the liberal standards of Rule 15. 1 Federal Rule of Civil Procedure 15(a) provides that
leave to amend “shall be freely given when justice so requires.” The determination as to
whether to grant leave to amend is entrusted to the sound discretion of the trial court. See,
e.g., Niagara of Wisconsin Paper Corp. v. Paper Indus. Union-Mgmt. Pension Fund, 800
F.2d 742, 749 (8th Cir. 1986). The Eighth Circuit has held that “[a]lthough amendment of
a complaint should be allowed liberally to ensure that a case is decided on its merits, . . .
there is no absolute right to amend.” Ferguson v. Cape Girardeau County, 88 F.3d 647,
650–51 (8th Cir. 1996) (citations omitted). Denial of leave to amend may be justified by
“undue delay, bad faith on the part of the moving party, futility of the amendment or
unfair prejudice to the opposing party.” Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th
Cir. 1987) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
1
Tellingly, a 24-line argument in Plaintiffs “Memorandum of Law” never cites a
case or even mentions the standard for granting a Rule 15 amendment in the Eighth
Circuit.
4
Here, the Court finds undue delay. Plaintiffs’ counsel candidly admitted—and the
Court very much appreciates Plaintiffs’ counsel’s candor at the hearing—that Plaintiffs
had all of the information included in their proposed Second Amended Complaint,
including the information needed to complete Exhibit B, at the time the lawsuit was
commenced in September 2017. In other words, Plaintiffs’ proposed Second Amended
Complaint is in no way tied to discovery Plaintiffs needed to obtain from Defendants or a
third party. Plaintiffs’ counsel—again, candidly—offered no excuse for not including
these allegations and detail in their original Complaint, their first Amended Complaint, or
their July 1, 2018 Claim Chart.
An amendment at this time will cause unfair prejudice to Defendants. In addition
to setting the deadline for amending the pleadings, the Scheduling Order set deadlines for
the typical exchanges in patent cases. Significantly, the Scheduling Order set a July 1,
2018 deadline for Plaintiffs’ Claim Chart and August 1, 2018 deadline for Defendants’
responsive Claim Chart. (Id.) As discussed in BreathableBaby, LLC v. Crown Crafts,
Inc.:
Requiring parties to identify and commit to theories of liability early serves
to focus discovery and to advance the efficient disposition of the case. The
nature of a patent infringement claim or invalidity defense encourages
strategies to delay producing information through discovery or otherwise
until the opposing side has disclosed the basis for its claims, contributing to
lengthy delays and high costs. One approach is for the court to require the
parties to submit detailed statements of their claims and defenses early in
the litigation either at the outset of the case, as part of a discovery
scheduling order, or, where the accused product is unavailable or otherwise
not subject to examination, following limited discovery.
5
No. 12-cv-94 (PJS/TNL), 2014 WL 3928526, at *3 (D. Minn. Aug. 12, 2014) (quotations
omitted).
The Local Rules for the District of Minnesota provide that “[u]nless the court
orders otherwise, the parties must use the Rule 26(f) Report and Proposed Scheduling
Order Form.” D. Minn. LR 26.1(b). The District of Minnesota provides a form
specifically for patent cases. This form includes the following:
(B) Plaintiff’s claim chart must provide a complete and detailed
explanation of:
(i)
which claim(s) of its patent(s) it alleges are being infringed;
(ii) which specific products or methods of defendant’s it alleges
literally infringe each claim;
(iii) where each element of each claim listed in paragraph
(e)(1)(B)(i) is found in each product or method listed in
paragraph (e)(1)(B)(ii), including the basis for each contention
that the element is present; and
(iv) if there is a contention by plaintiff that there is infringement of
any claims under the doctrine of equivalents, plaintiff must
separately indicate this on its claim chart and, in addition to the
information required for literal infringement, plaintiff must also
explain each function, way, and result that it contends are
equivalent, and why it contends that any differences are not
substantial.
Plaintiff may amend its claim chart only by leave of the Court for good cause
shown.
Rule 26(f) Report and Proposed Scheduling Order (Patent Cases) at ¶ (e)(1)(B),
http://www.mnd.uscourts.gov/local_rules/forms/Rule26f-report-patent_cases.pdf. It is
apparent that the parties used the Form and agreed in their Rule 26(f) Report that the
parties could amend their claim charts “only by leave of the Court for good cause
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shown.” (Doc. No. 25, Rule 26(f) Report (quoting Rule 26(f) Report and Proposed
Scheduling Order (Patent Cases) at ¶ (e)(1)(B)).)
Magistrate Judge Noel adopted the jointly proposed dates for patent exchanges
presented by the parties in the Court’s original Scheduling Order. The deadline for
Plaintiffs’ Claim Chart was July 1, 2018. Defendants’ Claim Chart was due on August 1,
2018. No later than forty-five days after the receipt of Plaintiffs’ Claim Chart,
Defendants’ Prior Art Statement was due. This meant that Plaintiffs’ Prior Art Statement
would have been served mid-August. Other exchanges typical in patent cases were set in
the original and amended Scheduling Orders, including the deadlines for a list of claim
terms, phrases, or clauses that each party contended should be construed by the Court.
Many of those dates have now passed.
Plaintiffs served their Claim Chart on June 29, 2018. (Doc. No. 36.) 2 Defendants
served their responsive Claim Chart on August 1, 2018. (Doc. No. 50, Budd Decl. ¶ 9,
Ex. G.) In their response, Defendants identified multiple deficiencies with Plaintiffs’
Claim Chart, including the failure to identify specific accused products; failure to identify
where each element of the claim is found; and failure to explain each function way, and
result that Plaintiffs contend are equivalent, and why any differences are not substantial.
(Id.)
Plaintiffs did not take any steps to amend their Claim Chart by leave of Court for
good cause shown. Instead, Plaintiffs waited about thirty days and filed their deficient
2
Plaintiffs unnecessarily filed their Claim Chart.
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motion to amend on August 31, 2018, seeking to include allegations of infringement of
claims 4 and 5 in the body of a Second Amended Complaint and incorporating a detailed
claim chart as Exhibit B to the Second Amended Complaint.
The Court agrees with Defendants that an amendment now will cause a delay in
the Court’s pretrial schedule. Specifically, it will force Defendants to prepare a new
responsive Claim Chart and potentially require rework of Defendants’ Prior Art
Statement, not to mention other exchanges. Again, Plaintiffs’ counsel candidly admitted
that they had all the information available to assert claims 4 and 5 and to prepare a proper
Claim Chart from the very commencement of the case on September 20, 2017 – now,
more than fourteen months ago. At the hearing, Plaintiffs’ counsel also conceded that
their present motion to amend was triggered by the notice of deficiencies identified by
Defendants in their responsive Claim Chart in early August. Plaintiffs offer no
explanation for the delay. While the Court does not find “bad faith on the part of the
moving party,” Plaintiffs’ delay combined with their deliberate litigation strategy does
not comport with their joint Rule 26(f) Report, the Scheduling Orders, Rule 15 or Local
Rule 16.
The Court, however, is reluctant to completely preclude Plaintiffs from litigating
merits of the case if the unfair prejudice caused by Plaintiffs’ undue delay can be
addressed, and where, in this instance, denying the motion to amend could potentially
subject Defendants to another lawsuit. The Court finds that at this stage of this case the
resulting unfair prejudice can be sufficiently addressed with an award of reasonable
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attorney fees to Defendants pursuant to 28 U.S.C. § 1927. 3 See Sherman v. Winco
Fireworks, Inc., 532 F.3d 709, 723–24 (8th Cir. 2008) (stating that § 1927 “authorizes a
district court to require an attorney to reimburse the excess costs and attorney’s fees
reasonably incurred by the opposing party as a result of an attorney’s unreasonable and
vexatious multiplication of the proceedings” (quotations and alterations omitted)).
Section 1927 provides:
Any attorney or other person admitted to conduct cases in any court of the
United States or any Territory thereof who so multiplies the proceedings in
any case unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and attorneys’ fees reasonably
incurred because of such conduct.
28 U.S.C. § 1927. “Courts have interpreted this statute to warrant the award of fees when
attorney conduct, viewed objectively, manifests either intentional or reckless disregard of
the attorney’s duties to the court.” Lee v. L.B. Sales, Inc., 177 F3d 714, 718 (8th Cir.
1999) (quotations omitted) (reviewing magistrate judge decision, affirmed by the district
court, to award sanctions under § 1927, but remanding for further findings of fact).
When awarding costs and fees under § 1927 as a sanction, the court must enter
findings of fact. See id. (“A district court must enter findings of fact in ruling on a motion
for sanctions.”). These fact findings “ensure that the sanctions address the excess costs
3
The Court recognizes that the payment of attorney fees alone to defend amended
allegations may sometimes not satisfy a showing of unfair prejudice. To be clear, the
unfair prejudice is not simply that Defendants will incur costs due to responding to the
Second Amended Complaint and amended claim chart, but that Defendants will suffer
unfair prejudice because Plaintiffs have now caused undue delay in the litigation,
disrupting everyday business within the Defendant companies, and forcing the
Defendants to respond to shifted theories. (See Doc. No. 49, Defs.’ Opp’n 11.)
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resulting from the misconduct, provide the sanctioned party an adequate opportunity to
respond, and facilitate meaningful appellate review.” Id.
Here, the Court makes the following findings of fact:
• Plaintiffs had all the information included in their proposed Second
Amended Complaint, including the information needed to complete
Exhibit B, at the time the lawsuit was commenced in September 2017. In
other words, Plaintiffs’ proposed Second Amended Complaint is in no way
tied to discovery Plaintiffs needed to obtain from Defendants or a third
party.
• Plaintiffs had all of the information available to prepare a compliant initial
Claim Chart pursuant to the Scheduling Order, and failed to serve a proper
Claim Chart by their deadline.
• Plaintiffs delivered a deficient Claim Chart, forcing Defendants to rely on a
deficient Claim Chart in order to prepare Defendants’ responsive Claim
Chart. The Court has reviewed Plaintiffs’ initial Claim Chart and finds that
it did not include the content required pursuant to the Scheduling Order.
• Plaintiffs should have been aware that their Claim Chart was deficient, but
were aware of the deficiencies in their Claim Chart at least by August 1,
2018.
• Defendants were forced to rely on a deficient Claim Chart when preparing
their Prior Art Statement;
• Plaintiffs never took any steps to seek leave of Court to amend their
deficient Claim Chart as they had agreed to in their Joint Rule 26(f) Report
and as is the practice in this District if amendments to patent exchanges are
sought.
• Instead of seeking leave to amend the initial Claim Chart, Plaintiffs
prepared a more detailed Claim Chart as an attachment to the proposed
Second Amended Complaint.
• On the last day before motions to amend the pleadings were due, and
without making any attempt to meet and confer with Defendants, Plaintiffs
filed a motion to amend their Amended Complaint on August 31, 2018. The
Court reviewed the motion and determined that it clearly failed to comply
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with the Local Rules. It was therefore stricken on September 4, 2018;
however, due to a docketing error, Plaintiffs’ counsel were not made aware
of this until September 12, 2018.
• Plaintiffs then filed a second motion to amend their Amended Complaint on
September 18, 2018. Not informing the Court of any urgency, a hearing
was set for November 13, 2018 and then rescheduled for November 19,
2018.
• Allowing an amendment now means that claims that could have originally
been included are asserted more than one year after the litigation
commenced.
• At the hearing, Plaintiffs’ counsel candidly admitted they had no excuse for
failing to include the additional asserted claims in their pleadings or in a
compliant Claim Chart when originally filed or when the Claim Chart was
originally due on June 1, 2018.
• The deadlines for the typical patent exchanges have now passed.
• Plaintiffs should have prepared a proper initial Claim Chart to begin with.
Plaintiffs should have immediately sought leave to amend their initial
Claim Chart when they received notice from Defendants of the deficiencies
on August 1, 2018. Plaintiffs should not have waited about thirty days to
file a deficient motion to amend on August 31, 2018, meanwhile forcing
Defendants to rely on a deficient Claim Chart to prepare Defendants’
Response and Prior Art Statement.
• If the Court allows Plaintiffs’ to file their proposed Second Amended
Complaint and an amended Claim Chart, Defendants will need to redo their
work on their responsive Claim Chart and Prior Art Statement, and
reconsider positions on claim construction. It is also possible, but not
certain, that discovery is implicated.
• Plaintiffs’ and their counsel’s conduct, while not dishonest, was
unreasonable and vexatious.
• To address the unfair prejudice caused by this conduct, an award of
attorneys’ fees to Defendants for reworking their responsive Claim Chart,
Prior Art Statement, and consideration of claim construction positions is
warranted.
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Plaintiffs’ and their counsel’s conduct meets the standard set forth in 28 U.S.C.
§ 1927. 4
ORDER
For the reasons stated above, and based on the file, records, and proceedings
herein, IT IS HEREBY ORDERED that:
1.
Plaintiffs’ Verified Second Motion for Leave to File Second Amended
Complaint (Doc. No. 43) is GRANTED, subject to the following conditions:
a.
Plaintiffs must file their Second Amended Complaint by December
6, 2018. If they do so, Defendants’ Answer is due on January 18, 2019.
b.
Plaintiffs’ Exhibit B will be accepted as Plaintiffs’ Amended Claim
c.
Defendants may submit an affidavit supporting the reasonable
Chart.
attorneys’ fees incurred with updating their patent exchanges 5 by March 15, 2019.
Defendants are advised that this submission will be carefully scrutinized for
reasonableness.
d.
If any depositions need to be re-taken due to the amendments
4
Black’s Law Dictionary defines “vexatious” as “without reasonable or probable
cause or excuse; harassing; annoying.” Vexatious, Black’s Law Dictionary (10th ed.
2014). Plaintiffs’ conduct—again not arising to bad faith—meets the definition of
vexatious.
5
This should not include fees or costs incurred with preparing the Answer to the
Second Amended Complaint, unless the work involved in preparing the Answer directly
relates to responding to the Claim Chart attached as Exhibit B to the Second Amended
Complaint.
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allowed by this Order, Defendants must inform the Court in a supplemental
submission to be filed no later than December 21, 2018. The Court reserves the
right to award attorney fees and expenses related to these depositions, upon a
request made by Defendants after the depositions and upon a showing of
reasonableness. This request must be made with the March 15, 2019 submission
referenced above.
2.
A Second Amended Pretrial Scheduling Order will be issued separately.
Date: November 30, 2018
s/ Becky R. Thorson
BECKY R. THORSON
United States Magistrate Judge
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